Tag: business

I’ve been saying this for quite a while, and now it’s become painfully obvious: advertising is obsolete.

Advertising is no longer needed for discovery

Advertising originated as a way to spread the word to potential buyers about things for sale. Without a sign with an arrow pointing to that drugstore around the corner, some people with a legitimate need for something sold at that store would not know of its existence. This is economically additive and a good thing.

This evolved into mass-market advertising a way to try to sell more stuff, mostly stuff that wasn’t needed, but might be wanted. This sort of advertising is a big part of the fuel of the consumer economy; it increases GDP but creates nothing, and is not economically additive.

Since the invention of comprehensively useful search engines, we can easily find whatever we might actually need, wherever it happens to be. Advertising is no longer needed to find things that we need. The fact that most search engines happen to be themselves funded by advertising is a historic artifact; there’s no reason that they must be funded by advertising simply because they currently are.

Media does not require advertising

The widely-accepted idea that advertising is an intrinsic part of the media business model is false. Just because advertising is part of most media businesses doesn’t mean that it must be. As Ev Williams outlines in his piece on The Rationalization of Publishing, other forms of media (TV, music, books) do not depend on advertising, and yet we’ve continued to operate under the assumption that for some reason news is different. He sets up three strawman arguments as to why news might be — and isn’t — different. I mostly agree with those points, but I believe that there are two additional (and equally misguided) reasons that we’ve believed that news is somehow different from other types of media.

Software was supposed to be magic

Big ideas have a long legacy. Riding along with the early meme that “information wants to be free” was the technocratic fantasy that software would make online advertising work so well that it would again become an economic benefit — a way for people to discover things that they need (or really want), and that they would have otherwise not been aware of. While this does happen to some small extent, we have treated the personal data that is required to make this possible as a zero-cost externality. If we factor in the real value (any value, really) of this data, the net economic value of the discovery of a product by way of highly targeted internet advertising becomes negative. Many companies and countries are now takingsteps that take this negative impact into account, making such advertising much more difficult, impossible, or illegal.

In addition to the hidden cost to individuals of sharing all this data, the cost of processing all of this data was vastly underestimated. For most online publishers, the complexity and cost of building and operating software to ‘serve’ advertising to their readers is more than the return on that investment. Online advertising never has been that profitable for smaller publishers, and it will prove not to be profitable even for the largest (Facebook, Google).

It’s true that in those early days of the ‘net it didn’t seem possible to simply charge people for what they wanted to read. Serving ads seemed like an easy alternative, and once we started down that road, we kept at it, even though it turned out to be much harder than we originally thought. And because of our love of software and of problem-solving and our stubbornness and our reluctance to abandon sunk costs, we kept trying to make online advertising work long after we should have simply reallocated all that effort to finding effective ways to charge readers directly.

As we now know, it’s not at all impossible to charge readers directly, but because we had put so much effort into trying to make online advertising work as the sole form of economic support for online journalism, we back-formed the idea that online advertising is the “only rational model” that can support online journalism. Bullshit. Advertising seemed like an easy way to support online journalism, it wasn’t, it’s not, and it’s time to move on.

News was supposed to be free

The “free press” is a nice idea but somehow along the way we confused free speech with free, as in beer. Again, because of the roots of the internet we became enamored with cheap, or even free news. Ev Williams said it well in the same piece I referenced above:

There is — and probably always will be — a surplus of free content. But that’s like saying there’s a surplus of free food in the dumpster behind the alley.

We’ve been dumpster-diving for news for long enough, and, needless to say, the effects are showing. Don’t think that we’ve seen the bottom either — it’s likely to get worse before it gets better.

Advertising adds no net value to the world

We need to discard the misguided assumption that news is somehow better if it’s free. As with any other product, we will pay for information that we actually need, want, and use. Advertising came to be part of the media business model as a way to support the creation of media not that readers wanted, but that advertisers wanted. Real companies make products that people pay for. News is no different.

Anything one needs to market heavily is necessarily either an inferior product or an evil one. (Nassim Nicholas Taleb, Antifragile)

All of what is spent on advertising could be used to make better things — or not spent at all. Nobody would shed a tear if we turned advertising off, and nor would it harm the economy. I include advertising in my list of things that we’ll look back on as 20th-century ideas whose time came… and went.